Advance Auto Parts has announced its financial results for the first quarter ended April 24, 2021.
“In the first quarter of 2021, we delivered record-breaking sales growth across our business, as both DIY and professional customers turned to Advance for their automotive needs amid a strong industry backdrop,” said Tom Greco, president and CEO. “I want to thank all our team members and independent partners for their relentless focus on execution during the quarter. In addition to the positive macro environment, our significant investments in both the business and our team over the past several years led to an improved customer experience and margin expansion. We delivered comparable store sales growth in the first quarter of 24.7% and adjusted operating income margin expansion of 478 basis points. Robust consumer demand, on-going cost control and operational improvements helped enable both gross margin and SG&A expense leverage, resulting in an all-time high for quarterly adjusted diluted EPS.
“Our commitment and actions to protect the financial strength of the business during the pandemic resulted in first quarter free cash flow of $259 million. In addition, we returned $204 million to our shareholders through the combination of share repurchases and our quarterly cash dividend of $0.25 per share. Based on the health of our balance sheet and the confidence in our continued cash generation, our board recently approved an additional $1 billion share repurchase authorization and a significant increase in our quarterly cash dividend. We’re committed to a balanced approach in returning cash to shareholders and our recent actions are a testament to that commitment. Building on the strength of our brands and our diversified digital and physical asset base, we remain focused on the execution of the long-term strategy we discussed in April to drive total shareholder returns for years to come.”
First Quarter 2021 Operating Results
Net sales for the first quarter of 2021 were $3.3 billion, a 23.4% increase versus the first quarter of the prior year. Comparable store sales for the first quarter of 2021 increased 24.7%.
Adjusted gross profit increased 26% to $1.5 billion. Adjusted gross profit margin was 44.8% of Net sales in the first quarter of 2021, a 91-basis point increase from the first quarter of 2020, driven by an increase in net sales, improvements in supply chain leverage, pricing actions, channel mix as well as material cost optimization. These improvements were slightly offset by unfavorable inventory related costs, product mix and headwinds associated with shrink and defectives. The company’s GAAP Gross profit margin increased to 44.6% from 43.5% in the first quarter of 2020.
Adjusted SG&A increased $121.9 million to $1.2 billion. Adjusted SG&A was 35.8% of Net sales in the first quarter of 2021, which improved 387 basis points as compared to the first quarter of 2020. The improvement was driven by fixed cost leverage primarily related to payroll and rent as well as lower insurance and claims related expenses from the company’s continued efforts on safety. The savings were partially offset by an increase in field bonus, marketing investments as well as an increase in third-party and service contracts related to IT transformational plans. The company’s GAAP SG&A was 37.0% of Net sales in the first quarter of 2021 compared to 40.6% in the first quarter of 2020.
The company’s Adjusted operating income was $298.8 million in the first quarter of 2021, including approximately $16 million in COVID-19 related expenses, compared to $113.2 million in the first quarter of the prior year. Adjusted operating income margin of 9.0% of Net sales in the first quarter of 2021 increased 478 basis points for the first quarter for 2021 compared to the first quarter of the prior year. On a GAAP basis, the company’s Operating income was $252.1 million, or 7.6% of Net sales, an increase of 466 basis points compared to the first quarter of 2020.
The company’s effective tax rate in the first quarter of 2021 was 24.3%, compared to 27.6% in the first quarter of the prior year. The company’s Adjusted diluted EPS was $3.34 for the first quarter of 2021, an increase of 234.0% compared to the first quarter of the prior year. On a GAAP basis, the company’s Diluted EPS increased 346.0% to $2.81.
Year to date Operating cash flow was $329.9 million through the first quarter of 2021 versus $10.9 million in the same period of the prior year. The increase was primarily driven by the increased cash generated from operations and other working capital improvements. Free cash flow through the first quarter of 2021 was $259.0 million.
On April 19, 2021, the company’s board of directors approved an additional share repurchase authorization of $1 billion. During the first quarter of 2021, the company repurchased approximately 1.1 million shares of its common stock for an aggregate amount of approximately $170.4 million, or an average price of $157.84 per share. At the end of the first quarter of 2021, the company had approximately $1.3 billion remaining under the share repurchase program.
On April 19, 2021, the company’s board declared a regular cash dividend of $1 per share to be paid on July 2, 2021, to all common stockholders of record as of June 18, 2021.
Updated 2021 Full Year Guidance
“We continue to see top-line sales strength in the early weeks of the second quarter of 2021,” said Jeff Shepherd, executive vice president and chief financial officer. “Through the first four weeks of Q2, our comp sales continue to trend in the mid-teens and on a two-year stack are comparable with our Q1 2021 increase of 15.4%. While we’re still anticipating significant volatility throughout the balance of this year due to macro-economic factors, we’re again updating our full year guidance to reflect this continued top-line momentum.”